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Backdoor IRA across years

Forum|Forum|2 years ago
March 14, 2024
2 replies
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I was trying to piece together previous replies on this topic, but wanted to check on this scenario

I have a customer who contributed $6K to an IRA in 2022 and did a backdoor Roth IRA in 2023. They also did another IRA contribution in 2023 for $6.5K and another backdoor Roth IRA conversion. So she got a 1099-R for $12.5K.

I am looking for advice on how to report this given the contribution/conversion process for the 2022 amount spans into 2023 and is reported in 2023.

thanks

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Best answer by qbteachmt

I think there was confusion. When I went back to recheck, she stated that: "In Jan 2023, I made a 6k contribution/conversion for tax year 2022 and Dec 2023 I also made a 6.5k contribution/conversion for tax year 2023, which is why the [2023] 1099-R form shows 12.5k." So it turns out there was no delay after all!!

"she stated that: "In Jan 2023, I made a 6k contribution/conversion for tax year 2022 and Dec 2023 I also made a 6.5k contribution/conversion for tax year 2023, which is why the [2023] 1099-R form shows 12.5k." So it turns out there was no delay after all!!"

So, is there where we are:

She had no Trad IRA, SIMPLE IRA or SEP IRA. She made a nondeductible contribution into a new Trad IRA account in Jan 2023 for tax year 2022 and immediately converted all of it to Roth.

And later that year:

She had no Trad IRA, SIMPLE IRA or SEP IRA. She made a nondeductible contribution into a new Trad IRA account in Dec 2023 for tax year 2023 and immediately converted all of it to Roth.

Yes, then each transaction is a Backdoor Conversion. Again, "across years" is meaningless and inapplicable to anything we've covered. There are Roth considerations where that applies. Not getting into the Roth, but afterwards.

Just-Lisa-Now-

Intuit Community Champion

were these IRA contributions non-deductible? if so they should have landed on the 8606 so when the 1099R for the conversion was received, it would be reduced by the non-deductible IRA basis on the 8606.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

K

KJM14Author

Level 3

these would be non deductible (after tax) IRA contributions. she has no IRA basis as of now

qbteachmt

Level 15

"these would be non deductible (after tax) IRA contributions."

Okay. But you also stated the contribution made in 2022 wasn't converted until 2023. You did not state the contribution was made in 2023 for tax year 2022. So, either there is gain, loss, or neither. The market has gone crazy, and with any delay, that makes it more likely your taxpayer has gain. This is not Basis. This is taxable income, upon conversion.

"she has no IRA basis as of now"

A Full conversion is going to be pro rata. A Partial conversion is going to be pro rata.

The word "backdoor" is used to describe an immediate and instantaneous conversion of only basis with no other funds not being converted at that same event. And it's not just "IRA" but aggregated as Trad, SEP and SIMPLE IRA accounts.

Otherwise, all you have is a regular conversion.

Don't yell at us; we're volunteers

qbteachmt

Level 15

"spans into 2023 and is reported in 2023"

The tax year of the contributions isn't important.

"I have a customer who contributed $6K to an IRA in 2022 and did a backdoor Roth IRA in 2023."

By definition, then, that is not Back Door.

A "Backdoor" is just a conversion. What makes it "backdoor" is that the contributions are supposed to have been post-tax, so that makes them basis (and nondeductible) and the conversion is nearly simultaneous to that contribution date, so that it avoids any gain (which is untaxed income). And the other trick is that this person is supposed to have no other Trad IRA, SIMPLE IRA or SEP-IRA pre-taxed or "never taxed" funds, because these get aggregated into applying Basis to a conversion to determine if there is pro rata taxable conversion.

In other words:

Everything goes in as basis and is immediately converted, and is the only amount that existed in this type of account. That's the magic of "back door" because it is how a person not eligible for Roth, still manages to end up with funds in Roth without triggering a taxable conversion event. Ta Da!

So, set aside "backdoor" and simply determine if all of this (all in one tax year) conversion is a taxable event, a pro rata taxable event, or a nontaxable event.

Don't yell at us; we're volunteers

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